I've been playing with PMDX-171s (www.pmdx.com) as limit/home switches, and spindle speed sensors. They work remarkably well - much better than I would have expected. Properly setup, they seem repeatable to within +/- 0.0002". Unlike optical switches, they are tiny (0.6" x 1.575" x ~0.3") there is almost no risk of contamination by swarf or coolant. I plan to mount mine totally enclosed within UHMW enclosures, removing the screw connector blocks for the cable to minimize the height, and provide rubber wipers to clean off any ferrous debris than might interfere with their operation. Seems a much nicer solution than optical to me.
Regards,
Ray L.